Forex Watchlist: The US Dollar Is Testing a Key Support for a Second Time in Weeks


 The U.S. Dollar Index (DXY) is testing a key technical support for a second time in weeks!

Will we see a bounce or a breakout for DXY?

I’m looking at the daily chart for clues.

U.S. Dollar Index (DXY): Daily

The next couple of days will be busy for dollar traders as Uncle Sam is scheduled to print inflation and labor-related reports.

Specifically, we’ll see the U.S. PCE core price index and jobs-related data like the ADP report, ISM’s services PMI, and the big nonfarm payrolls (NFP) release.

Word around is that this week’s numbers will point to slowdowns in inflation AND the labor market.

With less pressure on the Fed to fight inflation, markets might feel more comfortable pricing in slower rate hikes from the Fed. They could buy “riskier” bets other than the safe-haven dollar.

DXY, which is already having trouble maintaining bullish momentum above 106.00, could dip below the psychological handle and trade below the daily chart’s 200 SMA for the first time since June 2021.

I wouldn’t discount further USD gains though.

For one thing, a bunch of FOMC members (including head honcho Powell himself) are scheduled to give speeches where they’ll likely try to kill “pivot” or “Fed slowdown” speculations.

Better-than-expected U.S. data could also attract traders who are looking for good economic bets amidst global growth concerns.

A clear jump above 106.00 could set DXY for a bounce to the 110.00 psychological area. Not only does it line up with an inflection point, but it’s also near the daily chart’s 100 SMA.

What do you think? Will the dollar get enough support to test the 110.00 levels before the week ends?